Share story

Group Health is moving its headquarters to a new Vulcan building in South Lake Union, becoming the latest in a string of big tenants won over by Paul Allen’s real-estate company.

The health-care cooperative, which provides medical care and health insurance to about half a million people in the Northwest, will anchor a new building Vulcan plans to build on Westlake Avenue North just north of Denny Way, in the midst of a health-industries cluster Vulcan is assembling in the neighborhood.

About 700 of Group Health’s nearly 10,000 employees will move to the new location when it’s finished in 2007, taking nearly 60 percent of the planned 320,000 square feet. The cooperative has been headquartered in a Sabey Corp. office building at 521 Wall St. since the late 1980s but has made no secret it was shopping for new digs downtown when its lease expires in two years.

Landlords and developers have been making their pitches to Group Health for much of the year. A lease of the size Group Health was looking for — 185,000 square feet — would have been enough for a number of big landlords to kick off office projects they are eager to build.

Vulcan was able to offer a location with a burgeoning health-sciences presence and the promise of retail, restaurants and nearby housing. The building will be just south of planned biotech-research buildings and will be a block north of Vulcan’s 2200 condominium-hotel-retail project at Westlake and Denny.

Another factor was Group Health’s ability to acquire an ownership interest in the building, which some competing developers couldn’t offer.

Group Health owns much of its real estate in other locations, and the Vulcan partnership made the deal akin to owning its headquarters, said Jim Truess, Group Health executive vice president and chief financial officer.

“It’s because we expect to be there for a long period of time,” Truess said. “The economics are more favorable.”

Group Health and Vulcan officials yesterday declined to specify how big Group Health’s ownership stake will be, but they said it would be significant. Vulcan remains the managing partner of the project.

“They really liked the notion of a mixed-use community where you could walk to work, jump on a streetcar and get downtown to shopping,” said Vulcan real-estate chief Ada Healey. “We’re designing for them really a cutting-edge building.”

It’s the latest plum tenant Vulcan has landed to maintain its momentum in South Lake Union, where it controls 60 acres. In early 2003, when it needed a tenant to kick off its Alley24 mixed-use project across from REI — a project of about the same size — Vulcan persuaded architecture firm NBBJ to leave its longtime Pioneer Square home.

“Vulcan — there’s no one like them in the market right now,” said Leigh Callaghan, senior vice president for office leasing at Colliers International. “They are hitting home runs out of the park.”

For Sabey, it’s a loss, but Group Health won’t be moving for two years, and the downtown Seattle office market continues to tighten up, Callaghan said.

“If I were a landlord looking out, seeing what I see, I would be excited,” he said.